Consolidate consumer loan and cash reserves
The amicable settlement of the debt
Households seeking to get out of the negative spiral of over-indebtedness have an interest in “purging” all the recourses available to them before deciding on a merger operation .
Clearly, the purchase of loans is not the only way out. The priority objective is primarily to reduce the monthly payments and to find a debt ratio correct, we advise to try beforehand a negotiation file by folder with each creditor.
The good commercial relations that some customers maintain with their bank can sometimes serve as a basis for an amicable negotiation. The latter is often understanding and agrees to redesign the loans of its customers.
Moreover, it is a safe bet that she will prefer to be conciliatory rather than risk leaving a client unable to settle his debts.
Administrations also quite frequently accept tax averaging for taxpayers who are in financial difficulty.
The use of a broker
The most usual way to group your credits is to use a professional. The latter makes it possible to circumvent the numerous obstacles that do not fail to arise in this type of situation, such as:
- Facing the complexity of mounting the loan file
- Find the different specialized banks likely to accept the consolidation operation
- Verify the feasibility of the operation
- Establish funding studies
- Present the request to the financial institution and argue in favor of the borrower
The additional cost of the loan consolidation operation
If consolidating all its loans makes it possible to obtain a lower monthly payment, one must be aware that this operation will increase (sometimes considerably) the cost of each loan.
To fully understand the consequence of such a decision, we propose a numerical example showing the gap between the two situations encountered by a household. The first in the debt distress phase and the second after a consolidation operation. To facilitate the study, we decided to show results excluding borrower insurance.
Take the example of a household whose professional income amounts to 2500 € net monthly whose financial situation is as follows:
the rest of
Cost of credit in case
|Car Loan||6.70%||13000 €||$ 255.52||48 months||€ 12,264.96|
|Revolving loan||15.60%||3000 €||$ 126||30 months (2)||€ 3,780|
|Real estate loan RP (3)||4.20%||€ 122,200||€ 916.20||180 months||€ 164,916|
|Consumer loan||7.25%||3000 €||$ 119.52||20 months||$ 2390.40|
|Overdraft||17%||2000 €||–||(4)||$ 340|
|totals||–||143 200 €||$ 1416.92||–||$ 218,295|
|Household debt ratio||56.6%|
(1) Proportional rate excluding insurance
(2) Given the possibility of reusing the reserve, we will go on our example over 30 months.
(3) Based on an initial loan of 170,000 euros over 25 years at 4.20%. We assume that the outstanding capital takes into account prepayment penalties.
(4) Calculation on the basis of an average debit balance of € 2000 to 17% over 12 months
Solution number one
|Duration: 240 Months to 4.80%|
|Total to pay||929.31 X 240 = 223,034 €|
|Monthly gain in purchasing power||$ 486|
|Cost of aggregation of credits compared to the original situation:||$ 4739|
Solution number two
|Duration 300 months at 5.50%|
|Total to pay||879, 37 X 300 = 263,811 €|
|Monthly gain in purchasing power||$ 537|
|Cost of aggregation of credits compared to the original situation:||$ 45,516|
Solution number three
|Duration 360 months at 6%|
|Total to pay||858, 56 X 360 = 309 908 €|
|Monthly gain in purchasing power||$ 558|
|Cost of aggregation of credits compared to the original situation||$ 91,613|